View from Davos: West remains upbeat about India

High in the Swiss Alps is the little city of Davos.

The highest city in Europe, it is a cold, snowed-in place that was known best for its great ski holidays.

It has around 12,000 inhabitants, most of whom learn to ski almost as soon as they learn to walk. The native language of most of  the people here is German, though some speak Italian as well.

The city — by Indian standards it would be a slightly large village — has been playing host to the World Economic Forum.  Every year leaders from politics, business, industry, and other walks of life descend on Davos to talk, network, resolve issues, and declare intentions for the coming year.

This year’s World Economic Forum took place under the shadow of the eurozone crisis and the recessionary trend in Western economies. With most Western countries facing declining growth rates, high rates of unemployment, growing deficits, high levels of debt, and mounting interest repayments, the tone of the conference was not the usual ‘capitalism is the cure for all national ills’. Instead, the focus was key words that were, till recently, the purview of the World Social Forum (WSF) — inclusive growth, sustainability, energy security, food security, combating inequality, collaboration between public and private, and, horror of horrors, state-directed capitalism.

With the Western economies in decline, capital needs to look for new markets that give it greater return. Among the key markets that they are eyeing is India. Despite the negativity we have been seeing in India over the last year or so, Western companies and investors are upbeat. What compels them towards India?

The starting point is the GDP. Growth of 7% is not 9% growth, but it isn’t 2% growth either. Companies in Europe and the USA are looking at internal markets that are growing exceedingly slowly, at between 1% and 3%. In comparison, 7% growth  is phenomenal. While there were those who expressed concern over the fiscal deficit, especially in light of welfare schemes adopted by the government such as NREGA, the Right to Education, or the Right to Food, others saw it as part of the ‘inclusiveness’ that formed the backbone of this year’s conference. They saw it as investment in future consumers.

A key phrase that was used to describe India during the WEF was “India is the future”. Not surprising, given the demographic dividend. India is a young country, with more than 70% under the age of 35. The median age of India is 26. In contrast, both China (35.5)  and Russia (38.7 years) are comparatively older countries. Also, given that India has fewer cities, fewer hospitals, fewer universities, fewer roads, these are seen as business opportunities for those who wish to build. Education and training are seen as another major investment area.

The second phrase used to describe India was “intellect”. It is seen as a country with highly skilled management, very creative people, and individuals who are able to adapt to changing circumstances rapidly. This is especially important when companies talk about setting up and expanding research laboratories in India employing Indian scientists. Or when companies talk about designing for the world, in India. It means that India as an economy is considered not just for back-end work that reduces costs, but also for high-end work that creates value.

Other repeated phrases were vibrant, democratic and dynamic. Not one person said elephants or culture or ancient civilisation. Most saw India as a modern, dynamic, diverse democracy that offered a potentially large market.

The one area of concern was not so much corruption or infrastructure or even policy paralysis, it was the lack of clearly understandable, consistent, administrative procedures. It was the time taken to start a business, manoeuvring  through all the red tape. The problem arose out of the fact that procedures seemed to exist in a black box of their own, with no one knowing the entire picture. The fact that most procedures were not consistent and relied on discretionary powers was a major issue that made it difficult for Western companies that are exceedingly process oriented to do business in India. They believe that simplified, transparent procedures will give growth in India a fillip that will take it to the next level of development.

Indians in Davos were far more critical of the government than foreign companies and leaders. Possibly because we live here and see the mess, and they live there and have seen their own governments leading them to the brink of bankruptcy. Those investing in India are doing so because of the market potential, the indomitable Indian spirit, the spirit of enterprise that is second nature to us, our natural optimism and hope. The future for India, in a cold Davos, looked just a bit brighter.